The House is expected to stagger out of town late today after jamming through a monstrous jumble of costly bills, including a third “continuing resolution,” and a $290-billion increase in the debt ceiling – to $12.4 trillion – as well as another “stimulus” bill that shovels more money onto the failed $787-billion measure enacted earlier this year. Also on the schedule is the Defense appropriations bill, the last of the 12 annual spending bills, with an increase one-third that given to total nondefense discretionary spending. Here is a rundown of the bills to be considered in the House’s four-bill endgame.
DEBT LIMIT INCREASE (H.R. 4314)
The continued profligate spending by the administration and Congress has forced a second increase this year in the government’s debt ceiling (the first was passed along with “stimulus” legislation in mid-February), and the fourth increase in the past year and a half. H.R. 4314 would increase the government’s statutory debt limit by $290 billion, from $12.104 trillion to $12.394 trillion. With Treasury borrowing $30 billion to $40 billion per week in support of record government spending, this increase only provides a cushion of 2 to 2½ months. This increase in the limit highlights the sheer magnitude of exploding U.S. debt and the urgency of getting budget deficits under control.
But the President’s budget plan would simply continue the recent trend of massive borrowing. Debt as a share of the economy is poised to exceed more than 50 percent this year (the highest share in more than 50 years), will rise to more than 60 percent next year, and will reach 82 percent of gross domestic product [GDP] by the end of the next decade under the administration’s policies. (In nominal dollars, debt held by the public will triple over the next 10 years.) The U.S. has not seen debt at these expected levels since the tail end of World War II. Even the countries of the European Union, hardly exemplars of fiscal rectitude, are required to keep their debt levels below 60 percent of GDP.
Federal Reserve Chairman Bernanke has noted recently that the greatest long-term economic challenge facing the U.S. is its unsustainable fiscal situation. Foreign creditors have also started expressing concern about current and projected U.S. budget deficit levels. Their opinions and actions are important because foreigners now own more than half (53 percent) of U.S. publically held debt. China is the largest foreign creditor to the U.S., accounting for 24 percent of all foreign holdings of U.S. debt. In a worrisome development, Moody’s Investor Services said this month that the U.S. and the United Kingdom may “test the boundaries” of their AAA sovereign credit ratings in coming years if they fail to shore up their debt levels. Moody’s recently classified both countries as “resilient.”
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